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3Com plans 56-kbps licenses

Its proposed patent licensing arrangement could speed up the standards-setting process, but 3Com may have another ace.

    3Com (COMS), which earlier this year purchased modem maker U.S. Robotics, will sell off 56-kbps modem patents based in part on an obscure inventor's technology, putting the patent ball in Rockwell's court.

    3Com announced that it will license its 56-kbps modem technology at rates that could ease a logjam in current negotiations for an international standard for the new modem technology. The company said all of its patents for 56-kbps modem technology will be licensed for a one-time fee of $100,000 or a "running" royalty that will not exceed $150,000 per manufacturer.

    3Com will further license inventor Brent Townshend's 56-kbps technology patents, once they are issued, for $1.25 per each modem sold and $9 for each "head-end" port. 56-kpbs modems currently retail for around $150, while head-end ports (used by Internet service providers) range between $350 and $450.

    3Com says that its proposed patent licensing arrangement could speed up the standards-setting process.

    Observers agree. "3Com is proposing one-time charges, which is very desirable. There is a real problem for many vendors with royalty charges because they are not capped, they go on forever, and they are a way of passing proprietary information on sales [to potential customers], says Ken Krechmer, editor of Communications Standards Review, a technical journal.

    A preliminary standard for 56-kbps modems from the International Telecommunications Union, also called a "determined" standard, will likely be delayed as companies grapple with concerns about intellectual property rights. A determined standard was originally expected this month, but observers now expect a delay of two to three months.

    3Com's agreement with Townshend is for exclusive licensing rights.

    A consultant to 3Com, the president of his own company, and also an associate professor at Stanford University, Townshend came up with the idea that by connecting servers to the digital part of the Internet, it's possible to transfer information from the server to the client faster than the transfer from the client to the server, because almost all clients rely on analog technology. 56-kpbs modems enable users to download information at about twice the rate of the 28.8-kbps modems in common use.

    3Com says Townshend's breakthrough is seminal, but rival Rockwell, which has developed a competing standard of 56-kbps technology, casts doubt on that assertion.

    "He [Townshend] claims fairly broad intellectual rights over this technology, but one has to really question whether that is something that will stand up given the work that has been going on," says Mike Henderson, director of marketing for central site modems at Rockwell. "A basic patent is really probably not possible here," he adds.

    Townshend could have a key piece of technology, in which case Rockwell would license it on reasonable terms, just as the company does in many cases, Henderson says.

    Of Rockwell's plans for licensing intellectual property related to 56-kbps modems, Henderson says, "We have not established our position yet. It's good to see 3Com making this announcement...
    We'll wait and see if others follow along. It would be nice if Townshend would come along and do the same thing; it would remove a lot of doubt."

    Modems using 3Com's U.S. Robotics brand modems with x2 technology don't currently operate with modems based on Rockwell and Lucent K56flex technology, since standards have not yet been set.

    "Rockwell is trying to figure out how to move forward but they are behind because Townshend already has an arrangement with 3Com. They are uncomfortable with standards moving forward without understanding the business issues," Krechmer speculated.

    3Com's apparent eagerness to license fundamental technologies could help speed adoption of its own products at the expense of products based on Rockwell or Lucent technology. Because of this, Rockwell in particular may want to slow the standards process down.

    "What the news indicates is that the business negotiations are not complete," Krechmer says, noting that the technical standards are being slowed down by business issues but that 3Com is trying to speed it up.

    Reuters contributed to this report.